1 eFX Daily colour

1.1 FX Spot

1.1.1 US

(Jan-30) The FED recently decided to keep interest rates unchanged. This decision comes amid ongoing concerns about inflation, which remains above the Fed’s 2% target. The current federal funds rate is maintained at a range of 4.25% to 4.5%. President Trump has criticized the Fed’s decision, arguing that lower rates are necessary to boost the economy. However, the Fed is taking a cautious approach, assessing the impact of inflation and potential economic policies.


1.1.2 ECB

(Jan-30) The ECB has cut its benchmark deposit rate by 25bps to 2.75%. This is the fourth consecutive rate cut as the ECB aims to support the eurozone economy and manage inflation.


1.1.3 SA

(Jan-28) The market has stabilized, and the rand has improved following the DA reaffirmation of their commitment to the GNU. This comes after weekend reports suggested instability within the GNU due to the President signing a new law facilitating state land expropriation.

(Jan-30) SARB has cut interest rate by 25bps which places the repo rate at 7.50%. Four out of six members voted in favor of the cut.The rate cut aims to support economic growth amid stable inflation and global uncertainties.

1.1.3.1 USDZAR levels

  • At 1 PM (Jan-27), the ZAR surged past our resistance level of 18.60, driven by idiosyncratic risks linked to the expropriation bill. This upward movement is notable given the concurrent decline in the dollar index and gains in gold prices, both of which typically support the ZAR.
    • Manqoba [RMB’s Research Analyst] notes that the weakening correlation between gold and the South African Rand (ZAR) is expected, given the significant decline in gold mining output. As this downward trend in production continues, the correlation and its impact on terms of trade are likely to diminish further.
  • The ZAR regains some ground (Jan-28) after the DA confirmed its commitment to the GNU. The ZAR is now trading below 18.70, signaling a positive market response to this news.
  • When we broke the 18.60 lvl at 1PM (Jan-27), the implied topside was 18.87 and we later traded a high of 18.86 on (Jan-28). Thus our updated usdzar range is 18.87 [up 27cents] - 18.50 [up 10cents]. Notice the topside is up 27cents from prior topside range while the bottom is up just 10cents, this is indicative of the topside pressure on the ZAR.
  • (Jan-30) Topside on the ZAR revised higher to 18.94 and bottom at 18.40. Yesterday (Jan-29) we saw a pull back in volumes, about 30% lower than the recent ADV as the mkt was anticipating the FEDs decision [kept rates the same]. Both the SARB and ECB cut interest rates by 25bps today, as such we expect to see volumes pick up again as the market incorporates this information to price relevant risks.
  • (Jan-31) There is still not enough ZAR supportive information, as such, we do not expect to trade below 18.40 anytime soon.
    • President Trump also threatened to impose 100% tariffs on the BRICS countries should they go ahead and move away from using the dollar.

1.1.3.2 USDZAR spreads

  • (Jan-31) Good news ran away from ZAR as we saw the market de-risk at the back of Loadshedding.
    • We got the widest spreads for ’25 today. Prolonged periods of loadshedding will erode investor confidence leading to greater vol in ZAR.

1.1.4 Key events this week:

  • SA Trade Balance Rand, Friday
  • US personal income & spending, PCE inflation, employment cost index, Friday

1.2 FX Volatility Update

1.2.1 Update

By Thuto Mukena - Institutional Sales Specialist (Jan-31)

  • Overview

It’s been a data-packed, headline-heavy week, with risk conditions swinging in all directions. The ZAR has had a choppy week, yesterday’s 25bps SARB rate cut sent the local unit in the red territory, reversing some of its prior session’s gains, leaving the pair to close the week at R18.5688/$.On the vol front, the 1-week volatility risk premium has compressed deeper into negative territory, highlighting that the market mispriced and underpriced this week’s risk conditions. USD/ZAR Implied vols also hover lower as we brace for an exit for this week , the 1W USD/ZAR implied vol tenor no longer trading at a premium over 1M. The tenor closed yesterday’s session 1.87 vol p.p below opening levels.

  • EM & G10

EM pairs saw mixed spot performance on the day, while most G10 currencies were offered, closing the session weaker. On the implied vol front, G10 implied vols largely tracked spot moves, with USD/CAD and USD/JPY 1-week implied vols standing out as the exceptions, firming by 145bps and 64bps from the open. Main event on the day was the ECB rate decision, EUR/USD 1-week implied vol dropped by 62bps, declining alongside spot in the aftermath of the ECB’s 25bps rate cut, which set the deposit rate at 2.75%. Key take aways from the press conference is that the central bank maintained a data-dependent stance on future cuts, emphasizing that policy remains restrictive while also flagging concerns about growth risks in the region.


1.3 Africa

1.3.1 Update

By sizwe Mfayela - Institutional Sales Specialist (Jan-31)

  • Mauritius
    • Moody’s affirmed Mauritius’ foreign issuer rating at Baa3 - the lowest investment grade rating and changed the country’s outlook from stable to negative. The outlook change is due to the country’s ability to address its challenging fiscal situation and political adjustments.
  • Nigeria
    • The Central Bank of Nigeria states it is in the last stages of clearing from unmet fx obligations. Nigeria had a backlog of $7bio in March last year.
  • Tanzania
    • Tanzania has signed a $2 bio deal for a railway link to a nickel mine with China Railway Engineering Group Ltd. and China Railway Engineering Design and Consulting Group. The railway link is set to be 282 kilometres and will facilitate the export of mineral resources between Tanzania and Burundi.
  • Zambia
    • Zambia Jan YoY CPI remained constant at 16.7% vs 16.7% in Dec, with food inflation rising 19.2% vs 18.6% in December. As a result, the Bank of Zambia is expected to keep rates unchanged in next month’s MPC meeting.
    • Zambia moved to a trade deficit of -ZMW 3.3bio in Dec vs a surplus of ZMW 1.1bio in Nov.
  • Eurobonds
    • SSA closed +0.125/+0.50. Flows felt very month-endish with underperformers like ANGOL and SOAF finding a bid. Local activity picked up as well in NGERIA and KENINT making those monthly outperformers two-way on any re-weighting selling seen thus far.
  • NIGERIA
    • Locals lifted the long-end after taking supply out the belly yesterday, but the street has been long the name for a couple weeks, and have been comfortably selling into local demand. The bigger story was in FX where chunky flows changed hands around the 1500 level.
  • ANGOLA
    • Saw a month-end bid but remained offered at the close once again, it seems the bonds are struggling to sustain a bid.

1.3.2 Economic data

Economic data releases